To restart the economy, identify the recovery foundation’s workforce | Analysis – analysis
In July 2005, the floods in Mumbai forced the closure of a factory in Taloja that manufactured fiber optic cables. These cables are made by superheating silica and other raw materials until the molten glass is pushed through channels and strained through microscopic holes to create the fibers. As power and fuel supplies were interrupted, the factory operations had to stop, causing the molten glass to solidify in the system. Although power was restored in a few days, it took several months and millions of dollars to remove toughened glass from complex machinery before the factory could resume operations. Restarting a stagnant economy is a bit like this. While the economy may come to an abrupt halt with a lockdown, it takes months to restart and billions of dollars to lose until normalcy resumes.
The Indian economy has many moving parts, of which migrant workers are an important component. Their removal from the manufacturing and services value chain will halt the revival process because almost everyone would have returned to their villages as the restrictions are eased, a process that has begun. It is understandable that they do not return for several weeks, if not for months. This will incapacitate the economy, decreasing at least a quarter of annual GDP.
Economic activities are intricately interconnected. Production from one industry is essential to another, and ancillary industries are needed to support major industries. For example, the road transport industry needs dhabas on the road; Telecommunications networks need service engineers who, in turn, require the restaurants and hostels that support them. All of them must be connected in a chain in precise proportions for the economy to restart optimally. Waiting for them to become organically established will be time consuming and costly.
Here is an example that illustrates the phenomenon. When the Army is summoned after an episode of internal disturbance, the administration needs to begin the normalization process after the situation has been brought under control. The first group of people encouraged to return to work are bus drivers. When the buses start to board, it gives an appearance of normality and transports other workers to their workplaces. The city’s complex ecosystem begins with the mobilization of bus drivers who form the first layer of the “recovery foundation workforce.” Therefore, it is crucial to identify the “recovery foundation workforce” among migrant workers and bring them back to the economic structure together by joining four key data sets.
The Indian workforce has a strong association between demographics, skill sets, and preferred job locations. For example, agricultural workers working in Punjab come from groups of specific locations. Similarly, factory workers with specific skills migrate from particular districts. This geographic location and skills specialization link is the first key whose dataset exists with employers.
The second key is to determine the exact location of these migrant workers who can be divided into four categories. They would be stranded in their workplaces, in transit, in their villages, or in quarantine detention camps. This data set of the location of each individual is available with all mobile phone operators.
The third parameter is to develop a return schedule for the workforce, starting with the “core” industries. While all industries and sectors should start working simultaneously, that is not optimal. For example, it will be more critical to move farmworkers to their workplaces to capture the harvest and sow window, than to say that real estate construction workers return to their unfinished projects. The former is time sensitive, while the latter can wait. The broad contours of this calendar can be developed through war games and establishing the inescapable minimum requirement for each value chain. Taking the example of agriculture, the steps involved would be to determine the harvest and sow windows throughout the country, establish the minimum amount and location of the labor force required to achieve that, determine the transportation routes and required auxiliary support, and activate that in priority. The data needed to develop this schedule is available from various ministries, and an entity such as Niti Aayog can merge them by creating a working group with representatives from each ministry.
The last key would be to implement return incentive packages to get migrant workers to their places of work in the shortest possible time according to the schedule. This could be in the form of advance wages credited directly to their accounts so that the cash flow reaches the bottom of the pyramid instead of subsidies given to industries that will decrease slowly, if at all.
All the data needed to model this restart is available in various databases, even if its fidelity is suspect. And, of course, this model is full of challenges and conflicts. However, even in its most imperfect form, it would still be better than waiting for an organic restart of the economy that will not only be costly from a time and resource perspective, but will also cause immeasurable misery as each part of the economy tries return to their place without the help of any macro planning.
Raghu Raman is the founding CEO, Natgrid, and former president of Reliance Industries.
The opinions expressed are personal.